1)? As I’ve said before, I don’t care whether Bernanke is reappointed or not, because who will be appointed that has a materially different theory of central banking than Bernanke?? I don’t see Ron Paul getting appointed.

But to reappoint Bernanke because a bunch of economists think it is a good idea is dumb.? The neoclassical economists were blind going into this crisis, and only a few outside the mainstream saw the debt building up, and said this would not work out well.

And, if I were in Bernanke’s shoes, I would not want endorsements from economists.? Oh wait, he is one.? Alas, I am one too, though rogue. Outside of economists, are politicians the only ones who trust economists?? Yet, the politicians use the economists as a useful shield.? “We only did what the economists suggested would bring prosperity.? We cannot be blamed if the experts are dunces.”

I think Bernanke will be reappointed.? I only hope he is there long enough to see him either struggle with stagflation, or with a Japan-style malaise, or both.? As I have said since 2004 at RealMoney, “This will not work out well.”

2)? Barack Obama is a bright guy.? He may be the brightest president since… um, I’m not sure, he might be the brightest of them all.? That does not mean that I agree with his ideas, because a bright man starting from bad postulates ends up in a bad place quicker.? That said, there seems to be some restraint on his part, as noted in this WSJ article:

In early July, the president ordered a briefing on derivatives — financial contracts that track the return on stocks, bonds, currencies or other benchmarks. Critics had been raising questions about administration proposals to regulate certain derivatives, such as credit-default swaps, which many blame in part for the financial crisis. With advisers gathered round on the Oval Office’s twin sofas, Mr. Obama said he was concerned that the administration hadn’t struck the right balance.

Its proposal called for standard derivatives to be traded on an exchange, bringing them into the open. Critics were calling the proposal too timid because it also would allow “customized” derivatives to continue trading privately. “What is to assure that this won’t drive all derivatives off the exchange?” the president asked, according to Mr. Emanuel.

He says Mr. Obama was frustrated his team wasn’t offering up a full range of views on how to approach derivatives regulation. “Get me some other people’s opinions on this,” Mr. Emanuel recalls the president as saying. “I want more than what’s in this room.”

In the end, the administration tweaked its position on derivatives. In legislative language drafted this week, it is seeking to require financial firms that offer customized derivatives to maintain higher capital cushions.

And so goes the proposed legislation.? It only tweaks at the edges the existing derivative setup, and does not question the troubles that the financial markets wreak on the cash markets when they are allowed to become gambling markets, where speculators trade with speculators, and the tail begins to wag the dog.? Synthetic markets must be smaller than the real markets, if we want to have longer-term stability.? Hedgers must lead the markets, not speculators.

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That’s all for now.? I don’t have much hope in the legislation on derivatives, or who leads the Fed.? Given where the terms of debate are, the debate excludes my views.